City Council probably could have done a better job of handling the arena issue this year. I asked Councillor Sohi about this a couple weeks ago, and he agreed. “In hindsight we should have been in the driver’s seat rather than letting the Katz Group drive the process,” he told me.
How much have things skewed in the Katz Group’s favor? Some would say a lot. Here’s what Paula Simons wrote about Council’s vote to purchase the land for the arena:
I am honestly awestruck at Katz’s audacity — and his brilliance. The city takes two large parcels straight off his hands, at his cost, allowing him to assemble and flip the land, with no expense or debt. The city pays all the upfront costs of the arena but still agrees to let the Katz Group choose and hire the architect, come up with the design, and keep all the revenues. We actually pay the team to promote the city. And, at Katz’s behest, we slap a tax on his business rival. It’s the most stunning power play in Oilers history.
The entire article is worth a read. It may have been a brilliant move on the part of the Katz Group, but I think it also opened the door for Council to gain some leverage. There are two key things to consider here – the land, and the design.
Purchasing the land that Katz assembled is a good deal for the City. Underutilized, valuable land is now owned by the City rather than speculative developers. The latest report on the proposed Downtown CRL pegs the cost of the land at around $30 million, a very reasonable amount. “The big piece of land for the arena proper is below market value so that was a no-brainier,” Councillor Iveson told me. Importantly, the City owns that land now regardless of what happens with the arena. “If the deal falls through, it’s a good asset,” Councillor Iveson said. I don’t know about you, but I’d much rather have the City own that land than a private interest. You might argue that the City could just as easily fail to do anything with the land, but at least we can put pressure on the City to make something happen. A private developer could just sit on the land forever. Getting rid of the parking lots is one of the most appealing aspects of this project.
Moving forward with the design process is an important next step. Conceptual stuff has been done by the Katz Group of course, but a vote in favor of the arena deal this week would really get the ball rolling. As I understand it, the City and the Katz Group would sit down and figure out the necessary retentions. They’d select the design architect, the local architect, and any consultants. An RFP would go out for the construction manager, and once the retentions were in place, the design process would start. According to the latest City report, “the City will fund the cost of design to a 60% level on which the tender documents will be based in order to get the best possible Guaranteed Maximum Price for the arena.” Keeping in mind the $450 million ceiling, the goal would be to produce a design that could be taken to market for that price, and the design itself is an element of that total amount. Importantly though, the City owns this design work (the Katz Group would retain ownership over the conceptual work they completed). “If either party elects not to complete the deal, the City will have ownership rights to the design work undertaken by the City.” You can read more about the budget request to start the process here.
The City needs the Katz Group’s help on this, so I think the collaborative approach makes sense. The Katz Group understands the market and they know what will sell. They’ve done the research and they know what has worked elsewhere around the league. Of course we want the design to be attractive, to comply with the Capital City Downtown Plan, and to support Edmonton’s other priorities, such as The Way We Green. But it has to be functional, too. With the proposed agreement, the City would get all of that design for less than all of the cost.
The design process also presents an important opportunity for Council to re-engage the public. The public consultation that will take place as part of getting to the final design must be taken seriously. It really should be seen as a rare chance to dramatically improve the way the City solicits input and feedback from citizens. We must do better.
Armed with both the land and a ready-to-build design for an arena, Council (and thus the City) will be in a much better negotiating position. Let’s assume for a minute that the deal falls through, perhaps because the province refuses to come to the table, and that Katz or a subsequent owner wanted to move the team. The City could justifiably go to the NHL and say “look, we have land and the design for a building ready to go” which would put the brakes on any move pretty quickly. The league is very unlikely to approve any move if the municipality is ready to play ball, especially in an important market like Edmonton. It gives Council leverage they lack at the moment, and it should put any relocation fears to rest, unfounded as they may be.
Not everyone agrees with this perspective. Councillor Caterina, for instance: “We could be spending taxpayers’ money…before we even know if an arena is a go or not.” But I don’t think there’s much harm in this limited amount of strategic spending. Everything appears to rest upon another level of government stepping up to the plate with $100 million or more. If that doesn’t happen, at least Council will be in a stronger position to move forward.
Maybe it’s not too late. Maybe with this week’s vote on the arena deal, Council can get back into the driver’s seat.
MasterMaq's Blog 
Please help, I do not understand what problem is being solved by building another arena. The only thing I can come up as a problem is that Katz will threaten to move the team to another city if a new arena is not built. This is not enough for me to get in favour of the city spending or committing hundreds of millions of dollars.
The current arena is one of the oldest in the NHL, and has limited opportunities for growth. Renovations would be costly. A new arena would, according to the Katz Group, better enable the Oilers to compete with other teams because they could earn more revenue.
It is highly unlikely the Oilers would move to another city, regardless of what happens with the proposed deal.
But is the issue really the arena itself or rather who owns it? In terms of seating, skyboxes and club seats it isn’t much different than the newer buildings around the league. It’s a far cry from the scene during the 1990s when antiquated pre-WWII buildings were being replaced… Rexall has much more in common with the new buildings than it does with Boston Garden or the Checkerdome.
It seems to me that the Edmonton taxpayer is being asked to dig deep for someone else’s private business venture. In most cases people would tell the business to take a hike, but as it always does with pro sports, emotion gets in the way.
Not sure how this deal enables a last place hockey team becomes better able to compete.
I am about 95% against a new arena but could be convinced with the right argument to increase the % to which I support the idea and as yet I have not seen anything yet.
I meant better able to compete financially, as a business. Obviously they still need to put a solid product on the ice.
BTW – thanks for your continued work on this and other YEG “stuff”
Thanks for reading 🙂
I’m sorry but I respectfully disagree with your premise.
The City owns all the cards :
We pay the rent.
There is no better place to play that doesn’t have a team.
We give back the ticket tax out of the goodness of our hearts.
All Katz has is the threat of moving the team and the hockey crazy voters throw the council out.
Yet look at the deal we have……..
If the City can’t get a good deal with the cards they have, how are they going to get a better one by putting more money into this deal?
Katz is driving this wagon and the best way to get our turn is to stop pushing the cart for him.
If the city wanted to play hardball all they would have to do is take the current ticket tax and put it into a fund for a future arena (who cares who builds it). This would decrease the value of the Oilers in the short term and increase the financial penalty for moving the team (to Katz or any future owner)
(if numbers thrown around the internet are to be believed) 7 million a year for three years is a 21 million dollar war chest paid for by Katz and Northlands for the inevitable “if I don’t get what I want I’m moving the team” conversation.
I agree with pretty much everything else on this blog and I really enjoy reading it, please continue.
Keith
I suppose that is the other problem being solved “… hockey crazy voters throw the council out” at next election.
But, Mandel is on his last term (isn’t he) and am I correct to believe that only a few others have stuck their neck out on this and others (Iveson) have enough of a base to survive?
Or is it that a councillor can be for/against the arena and when the Province does not come through with their theoretical portion and the deal dies that they can move on stating “I worked hard for my constituents who said they wanted the arena but those nasty Redford Tories did not come through” and/or “I worked hard to represent the desires of my constituents who clearly stated they did not want this Katz arena deal to go ahead.
Thanks for reading!
Council should have say no when they were first presented with the idea. It feels like we’re still at the beginning of the negotiations, though it has obviously gone on for quite some time. There hasn’t been that back and forth one would expect.
Is this what the drivers seat looks like?
http://www.edmontonjournal.com/business/Simons+Arena+land+deal+jumps/5635148/story.html
Was not the purpose of the additional 100 million to jump start development? If so how does transferring land from one private owner to Katz increase development?
Looks to me that the city is being led around by it’s nose.
Obviously things have changed since I wrote this. I did not realize that purchasing land could be considered “investment in the surrounding area” but we found out yesterday that it is, according to the City. No one should be happy about this turn of events.
Hey Mack, how do you feel about council sitting in the drivers seat now?